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10. The Procedure of Economics

The scope of praxeology is the explication of the category of human action. All that is needed for the deduction of all praxeological theorems is knowledge of the essence of human action. It is a knowledge that is our own because we are men; no being of human descent that pathological conditions have not reduced to a merely vegetative existence lacks it. No special experience is needed in order to comprehend these theorems, and no experience, however rich, could disclose them to a being who did not know a priori what human action is. The only way to a cognition of these theorems is logical analysis of our inherent knowledge of the category of action. We must bethink ourselves and reflect upon the structure of human action. Like logic and mathematics, praxeological knowledge is in us; it does not come from without.

All the concepts and theorems of praxeology are implied in the category of human action. The first task is to extract and to deduce them, to expound their implications and to define the universal conditions of acting as such. Having shown what conditions are required by any action, one must go further and define--of course, in a categorial and formal sense--the less general conditions required for special modes of acting. It would be possible to deal with this second task by delineating all thinkable conditions and deducing from them all inferences logically permissible. Such an all-comprehensive system would provide a theory referring not only to human action as it is under the conditions and circumstances given in the real world in [p. 65] which man lives and acts. It would deal no less with hypothetical acting such as would take place under the unrealizable conditions of imaginary worlds.

But the end of science is to know reality. It is not mental gymnastics or a logical pastime. Therefore praxeology restricts its inquiries to the study of acting under those conditions and presuppositions which are given in reality. It studies acting under unrealized and unrealizable conditions only from two points of view. It deals with states of affairs which, although not real in the present and past world, could possibly become real at some future date. And it examines unreal and unrealizable conditions if such an inquiry is needed for a satisfactory grasp of what is going on under the conditions present in reality.

However, this reference to experience does not impair the aprioristic character of praxeology and economics. Experience merely directs our curiosity toward certain problems and diverts it from other problems. It tells us what we should explore, but it does not tell us how we could proceed in our search for knowledge. Moreover, it is not experience but thinking alone which teaches us that, and in what instances, it is necessary to investigate unrealizable hypothetical conditions in order to conceive what is going on in the real world.

The disutility of labor is not of a categorial and aprioristic character. We can without contradiction think of a world in which labor does not cause uneasiness, and we can depict the state of affairs prevailing in such a world.23 But the real world is conditioned by the disutility of labor. Only theorems based on the assumption that labor is a source of uneasiness are applicable for the comprehension of what is going on in this world.

Experience teaches that there is disutility of labor. But it does not teach it directly. There is no phenomenon that introduces itself as disutility of labor. There are only data of experience which are interpreted, on the ground of aprioristic knowledge, to mean that men consider leisure--i.e., the absence of labor--other things being equal, as a more desirable condition than the expenditure of labor. We see that men renounce advantages which they could get by working more--that is, that they are ready to make sacrifices for the attainment of leisure. We infer from this fact that leisure is valued as a good and that labor is regarded as a burden. But for previous praxeological insight, we would never be in a position to reach this conclusion.

A theory of indirect exchange and all further theories built upon it--as the theory of circulation credit--are applicable only to the interpretation of events within a world in which indirect exchange [p. 66] is practiced. In a world of barter trade only it would be mere intellectual play. It is unlikely that the economists of such a world, if economic science could have emerged at all in it, would have given any thought to the problems of indirect exchange, money, and all the rest. In our actual world, however, such studies are an essential part of economic theory.

The fact that praxeology, in fixing its eye on the comprehension of reality, concentrates upon the investigation of those problems which are useful for this, does not alter the aprioristic character of its reasoning. But it marks the way in which economics, up to now the only elaborated part of praxeology, presents the results of its endeavors.

Economics does not follow the procedure of logic and mathematics. It does not present an integrated system of pure aprioristic ratiocination severed from any reference to reality. In introducing assumptions into its reasoning, it satisfies itself that the treatment of the assumptions concerned can render useful services for the comprehension of reality. It does not strictly separate in its treatises and monographs pure science from the application of its theorems to the solution of concrete historical and political problems. It adopts for the organized presentation of its results a form in which aprioristic theory and the interpretation of historical phenomena are intertwined.

It is obvious that this mode of procedure is enjoined upon economics by the very nature and essence of its subject matter. It has given proof of its expediency. However, one must not overlook the fact that the manipulation of this singular and logically somewhat strange procedure requires caution and subtlety, and that uncritical and superficial minds have again and again been led astray by careless confusion of the two epistemologically different methods implied.

There are no such things as a historical method of economics or a discipline of institutional economics. There is economics and there is economic history. The two must never be confused. All theorems of economics are necessarily valid in every instance in which all the assumptions presupposed are given. Of course, they have no practical significance in situations where these conditions are not present. The theorems referring to indirect exchange are not applicable to conditions where there is no indirect exchange. But this does not impair their validity.24

The issue has been obfuscated by the endeavors of governments [p. 67] and powerful pressure groups to disparage economics and to defame the economists. Despots and democratic majorities are drunk with power. They must reluctantly admit that they are subject to the laws of nature. But they reject the very notion of economic law. Are they not the supreme legislators? Don't they have the power to crush every opponent? No war lord is prone to acknowledge any limits other than those imposed on him by a superior armed force. Servile scribblers are always ready to foster such complacency by expounding the appropriate doctrines. They call their garbled presumptions "historical economics." In fact, economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics.

It is impossible to understand the history of economic thought if one does not pay attention to the fact that economics as such is a challenge to the conceit of those in power. An economist can never be a favorite of autocrats and demagogues. With them he is always the mischief-maker, and the more they are inwardly convinced that his objections are well founded, the more they hate him.

In the face of all this frenzied agitation it is expedient to establish the fact that the starting point of all praxeological and economic reasoning, the category of human action, is proof against any criticisms and objections. No appeal to any historical or empirical considerations whatever can discover any fault in the proposition that men purposefully aim at certain chosen ends. No talk about irrationality, the unfathomable depths of the human soul, the spontaneity of the phenomena of life, automatisms, reflexes, and tropisms, can invalidate the statement that man makes use of his reason for the realization of wishes and desires. From the unshakable foundation of the category of human action praxeology and economics proceed step by step by means of discursive reasoning. Precisely defining assumptions and conditions, they construct a system of concepts and draw all the inferences implied by logically unassailable ratiocination. With regard to the results thus obtained only two attitudes are possible; either one can unmask logical errors in the chain of the deductions which produced these results, or one must acknowledge their correctness and validity.

It is vain to object that life and reality are not logical. Life and reality are neither logical nor illogical; they are simply given. But logic is the only tool available to man for the comprehension of both. It is vain to object that life and history are inscrutable and ineffable and that human reason can never penetrate to their inner core. The critics contradict themselves in uttering words about the ineffable and [p. 68] expounding theories--of course, spurious theories--about the unfathomable. There are many things beyond the reach of the human mind. But as far as man is able to attain any knowledge, however limited, he can use only one avenue of approach, that opened by reason.

No less illusory are the endeavors to play off understanding against the theorems of economics. The domain of historical understanding is exclusively the elucidation of those problems which cannot be entirely elucidated by the nonhistorical sciences. Understanding must never contradict the theories developed by the nonhistorical sciences. Understanding can never do anything but, on the one hand, establish the fact that people were motivated by certain ideas, aimed at certain ends, and applied certain means for the attainment of these ends, and, on the other hand, assign to the various historical factors their relevance so far as this cannot be achieved by the nonhistorical sciences. Understanding does not entitle the modern historian to assert that exorcism ever was an appropriate means to cure sick cows. Neither does it permit him to maintain that an economic law was not valid in ancient Rome or in the empire of the Incas.

Man is not infallible. He searches for truth--that is, for the most adequate comprehension of reality as far as the structure of his mind and reason makes it accessible to him. Man can never become omniscient. He can never be absolutely certain that his inquiries were not misled and that what he considers as certain truth is not error. All that man can do is to submit all his theories again and again to the most critical reexamination. This means for the economist to trace back all theorems to their unquestionable and certain ultimate basis, the category of human action, and to test by the most careful scrutiny all assumptions and inferences leading from this basis to the theorem under examination. It cannot be contended that this procedure is a guarantee against error. But it is undoubtedly the most effective method of avoiding error.

Praxeology--and consequently economics too--is a deductive system. It draws its strength from the starting point of its deductions, from the category of action. No economic theorem can be considered sound that is not solidly fastened upon this foundation by an irrefutable chain of reasoning. A statement proclaimed without such a connection is arbitrary and floats in midair. It is impossible to deal with a special segment of economics if one does not encase it in a complete system of action.

The empirical sciences start from singular events and proceed from the unique and individual to the more universal. Their treatment is subject to specialization. They can deal with segments without paying [p. 69] attention to the whole field. The economist must never be a specialist. In dealing with any problem he must always fix his glance upon the whole system.

Historians often sin in this respect. They are ready to invent theorems ad hoc. They sometimes fail to recognize that it is impossible to abstract any causal relations from the study of complex phenomena. Their pretension to investigate reality without any reference to what they disparage as preconceived ideas is vain. In fact they unwittingly apply popular doctrines long since unmasked as fallacious and contradictory.